Minimizing Risk in an Era of Resilience

Related Case Study:Springwoods VillageRelated Case Study: Martin Luther King Medical Center Master Planand Community VisionNature happens. Last year, the United States experienced 11 disasters—including floods, fire, drought, and windstorms—that caused at least $1 billion in damage and losses, and 14 such events in 2011, according to the National Oceanic and Atmospheric Administration. Worldwide, 700 natural disasters have affected more than 450 million people over the past two years, the International Monetary Fund reported in late 2012, noting that damages have risen from an average of $20 billion per year in the 1990s to $100 billion per year in the first decade of the 21st century. And the cost of dealing with it after the fact is only getting higher.

It is past time to recognize that we need to anticipate and prepare for these types of events, rather than simply react to them. Every project, at every scale, is unique in its challenges and presents different possibilities for creating multiple resilient designs that work with each other, not just independently. As explained in an article titled “Engineered Resilience” (Urban Land, May/June 2012), designing for resilience is not about an obvious “hardening” that turns buildings into dehumanizing bunkers, but rather designing systems and spaces to be flexible, adaptable, and redundant when put under stress.

Many real estate investors mitigate ownership risks by selecting investments in areas that are generally free of natural disasters, but global warming and nature’s fickleness can make even the safest location subject to disaster. Make a clear-eyed assessment of the specific challenges you might face, which include earthquakes, flooding, hurricanes, tornadoes, or ice- and snowstorms, depending on your locale. But even a forecast weather event can exceed predictions and leave an unexpected trail of destruction: the derecho storm that hit parts of North America in June 2012, for instance, wreaked $1.1 billion in damages and business losses across several states.

For each building in your portfolio, evaluate the environmental challenges it might confront, according to the following checklist.

Infrastructure: Identify all power, water, and telecommunications sources for your property. Then, devise a plan that outlines what you will do if these systems become unavailable. Consider capacity: How long will your backup systems need to operate off the grid? Can you recharge or refuel them while primary systems are down? Develop a transportation plan that assumes primary roadways are obstructed. Evaluate areas, such as underground parking, that are at risk in a high-water situation and come up with a plan to mitigate these factors.

People: Proactive disaster planning is a terrific way for building owners to engage tenants and impress upon them that their safety and welfare are important. Encourage tenants to create their own disaster plans. Make sure you have a current roster of all tenants, an emergency point-of-contact for each, and a way to communicate with them effectively in a disaster. Identify any tenants who have physical conditions that might require special evacuation or health services. Have an evacuation plan in place.

Finances: Identify special government programs and incentives that might be available to upgrade your building. Contact the Federal Emergency Management Agency (FEMA) and ask for its assistance in designing an emergency plan. Check with your insurance carrier to make sure your coverage reflects current replacement value, and determine whether specific actions you can take in disaster planning might lower your insurance premiums. Create an adequate reserve fund that can be accessed to make emergency repairs on a timely basis.

Operations: Emergencies put people and systems under stress and frequently lead to poor decision making. Make sure your property managers have a plan in place for emergency operation. Consider staff training and assignment, and decide who might need to be on site before, during, and after a major event. Because having someone on site throughout an emergency can mitigate extensive property loss, you may want to consider creating emergency living quarters on site.

Support: As with many aspects of business, when it comes to planning for resilience, relationships are key. Think about whom you will need to work with as you recover from any kind of event. Identify community partners, and know your civic authorities and emergency service providers. Select vendors and contractors who will give you priority service if an extended emergency occurs.

Property Acquisition

If you are considering a property acquisition, your due diligence should include an assessment of the building’s disaster resilience history. Do not work solely from the information provided by a broker; discuss the checklist from the previous section of this article with the current owners (and, if possible, tenants) and learn what they know. If they do not provide answers, or answers that satisfy you, then they likely have not made the proper investment to prepare for emergencies that you might face.

Appraise local resilience planning: Determine what sorts of disasters the property has experienced and what steps have been taken to correct any flaws in the design or operation since that event. Evaluate any potential new threats to the property due to recent nearby construction or infrastructure changes. Identify qualified local consultants who can help with the things you might need. (For example, in Houston, many contractors at different scales understand how to install hydrostatic doors, which keep water out of critical infrastructure like tunnels, basements with electrical vaults, and backup generators.)

Do a financial survey: Conduct a cost/benefit analysis for hardening the building and discuss recommended actions with your investors. Prioritize your action list and develop a realistic implementation schedule. Identify existing financial or tax incentives that might mitigate improvement costs.

Understand local regulations: A thorough knowledge of local building codes and municipal requirements is a must. In New York and New Jersey, for instance, if there is a blackout, a certified, unionized electrician must approve everything before a building’s power can be turned back on. Find out which requirements apply and create a list of vendors who can address each one. It is critical to begin building these kinds of relationships before you take ownership of a property.

New Construction

Building from the ground up offers the best opportunity to design a structure that will perform effectively under extreme conditions. Depending on where your project is in the construction timeline, different questions and issues will apply.

Location: Before finalizing the design and starting construction, thoroughly evaluate all the site implications as they relate to disaster planning. Even after construction is underway, identifying potential risk areas prior to completion will allow you to address them in less time, at a lower cost, and with less disruption than waiting until the building is completed. Consider what you need to do to satisfy program needs in terms of infrastructure connection and redundancy. If your power is provided by municipal sources, think about what backup systems might be needed. Consider the longevity of these alternative resources and prepare fuel and provisions accordingly.

Contractor relationships: Construction sites are highly vulnerable and dangerous places when severe weather or other natural disasters occur. Make sure your on-site team has a disaster plan that will secure the area and reduce the chance of human injury or property damage caused by flying debris. Consider the need for on-site emergency security, and make sure the on-site team is trained and ready to deal with emergency conditions.

Performance: Owners are already thinking about how their properties operate on a day-to-day basis with regard to energy, water, and so on. When it comes to resilience, however, a different measure of performance is required. Assess whether local building codes are sufficient, or if you should aim higher. In a disaster, having enough generator fuel on hand and having a structure built to withstand the worst that nature has to offer might be an excellent long-term investment. During a years-long resilience upgrade in the 1990s at the University of Texas Health Science Center at Houston, for example, when I was campus architect and part of the facilities operation leadership, the school did not use any hydrostatic doors that had not been tested multiple times.

Master-Planned Developments

If you are working on something larger than a single building, such as a corporate campus or a multibuilding, mixed-use development, everything you have read to this point applies, but at a much different scale. And that change in scale has big implications for resilience thinking. The completely new, mixed-use Springwoods Village development outside Houston and the Martin Luther King Medical Center Master Plan and Community Vision for Los Angeles County, a complete reworking of existing urban infrastructure and space, are great examples of how master-planned communities can address resilience in multiple, and sometimes surprising, ways.

Decentralization: Think about infrastructure, transportation, and communication in a district sense. With a larger project comes the ability to have more under your control, such as decentralized power and water. Consider the synergies of the different uses your development will contain. How can these different uses work together to provide food, water, housing, and wellness in the face of an emergency?

Community: Building a self-sustaining community might mean that your new development becomes an important resource to assist in the recovery of the greater city or region—or even to serve locals during a storm. Consider what that would mean in terms of shelter, energy, water, and food for an expanded population. Plan for the eventuality that your community could be commandeered by FEMA or another federal agency as a postdisaster go-to resource and/or emergency services staging area and decide how you could best handle the demand for shelter, power, and other resources.

The Costs

You need to think about resilience costs in a strategic way. The upfront expense may seem daunting, but the hard and soft postdisaster costs you could face are even greater. According to a recent New York Times article, a National Academy of Sciences report on the massive 2003 blackout in the eastern United States determined that “the economic cost of that disruption was about 50 times higher than the price of the actual electricity lost, and that didn’t take into account deaths or other human consequences.” Also, after a disaster, you are not the only one in need; everyone is scrambling and competing for limited manpower and resources, and paying a premium for them. In the rush to rebuild and repair, urgency only compounds the possibility that solutions may not be as well planned as they could be—or capable of withstanding the same kind of event that required the work in the first place.

Think of the effort in smaller, incremental steps. You can spread the costs over several capital expenditure cycles; tuck expenses into interiors projects as tenants move in and out; tap into different sources of financing and tax benefits that address your needs; and work floor by floor, or system by system. It is understandable that keeping resilience top of mind is not easy or comfortable; it means thinking about risk and weighing options. But incrementalism is far better than a “head in the sand” approach. A measured and well-planned resilience program will result in more thoughtful designs, more robust systems to protect your buildings and the people inside them, and a greater return on investment than patchwork repairs after disaster strikes.

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